MILAN, Nov 21 (Reuters) - Saudi Arabian oil company Aramco is reviewing its $9 billion Manifa oil field project and Saipem SpA, a major contractor, has been told not to take on any more commitments for it, the Italian company said on Friday.
The review involving the 900,000-barrels-a-day offshore project is another sign Saudi Aramco, by far the world's biggest oil company by output, wants to renegotiate contracts it signed at the height of the commodities price boom.
Saipem, one of Europe's biggest oil field services companies, did not specify in a statement whether other suppliers or contractors were affected. A Saudi Aramco spokesman was not immediately available to comment.
Saipem said it still had its contract for onshore development. Shares in Saipem, one of Europe's biggest oil services companies, plunged on rumours it had lost the contract.
However, Aramco has directed that no further commitments towards suppliers and contractors be taken on pending an analysis 'aimed at cost optimisation', Saipem said in a statement.
Saipem shares closed down 16.64 percent at 10.37 euros, while shortly after 1800 GMT the DJ Stoxx oil and gas index was 1.35 percent lower. Saipem shares had hit 10.23 euros during the session, their lowest level since mid 2005.
Shares in Spain's Tecnicas Reunidas, which according to its website is also a contractor on the project, gave up gains of 5 percent on Friday to close down more than 6 pct.
The Aramco move is an important sign oil companies are gaining bargaining power as lower oil prices ease the urgency to invest in projects, a Milan analyst said.
'Oil companies can now afford to review contracts that have already been closed. It's a precedent,' said the analyst, who spoke on condition of anonymity.
Khalid Buraik, Saudi Aramco's executive director of affairs, said early this month Saudi Arabia may renegotiate contracts for long-term projects as falling oil prices and the credit crunch ease competition for resources and so bring down project costs.
Aramco said this month it and ConocoPhillips, its partner in a plan to build a new refinery at Yanbu Industrial City, were halting the bidding process for construction contracts, citing uncertainties in the financial and contract markets.
The Manifa contract award was announced by Saipem in July alongside deals in Nigeria for a total of about 1.6 billion euros ($2 billion).
A RE-TENDER?
Industry website upstreamonline.com said Aramco would re-tender the project. The company had invited Saipem to bid again, along with Bechtel Group, France's Technip SA and Foster Wheeler Ltd, the site said.
Aramco officals were not immediately available for comment on this matter.
A senior executives at U.S. oilfield services company Halliburton Co, which also has a contract on Manifa, said on Wednesday Aramco had not told it that the project was to be cut.
However, U.S. analysts who attended Halliburton's investor meeting this week said the company indicated the project would now be drilled over a longer period of time. By 1822 GMT in New York, its shares were up 5.57 percent to $14.21.
Shares in Japanese engineering and construction company JGC Corp, a Manifa supplier, closed down 1.36 percent.
Saipem is 43 percent owned by Italian oil company Eni SpA . It had a record order backlog of 19.04 billion euros at the end of September.
(Reporting by Nigel Tutt and Claudia Cristoferi and Danilo Masoni in Milan, Atul Prakash and Tom Bergin in London and Simon Webb in Dubai; Writing by Ian Simpson; Editing by David Holmes and Andrew Macdonald) ($1=.7987 Euro) (ian.simpson@reuters.com; +39 02 6612 9666; Reuters Messaging: ian.simpson@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The review involving the 900,000-barrels-a-day offshore project is another sign Saudi Aramco, by far the world's biggest oil company by output, wants to renegotiate contracts it signed at the height of the commodities price boom.
Saipem, one of Europe's biggest oil field services companies, did not specify in a statement whether other suppliers or contractors were affected. A Saudi Aramco spokesman was not immediately available to comment.
Saipem said it still had its contract for onshore development. Shares in Saipem, one of Europe's biggest oil services companies, plunged on rumours it had lost the contract.
However, Aramco has directed that no further commitments towards suppliers and contractors be taken on pending an analysis 'aimed at cost optimisation', Saipem said in a statement.
Saipem shares closed down 16.64 percent at 10.37 euros, while shortly after 1800 GMT the DJ Stoxx oil and gas index was 1.35 percent lower. Saipem shares had hit 10.23 euros during the session, their lowest level since mid 2005.
Shares in Spain's Tecnicas Reunidas, which according to its website is also a contractor on the project, gave up gains of 5 percent on Friday to close down more than 6 pct.
The Aramco move is an important sign oil companies are gaining bargaining power as lower oil prices ease the urgency to invest in projects, a Milan analyst said.
'Oil companies can now afford to review contracts that have already been closed. It's a precedent,' said the analyst, who spoke on condition of anonymity.
Khalid Buraik, Saudi Aramco's executive director of affairs, said early this month Saudi Arabia may renegotiate contracts for long-term projects as falling oil prices and the credit crunch ease competition for resources and so bring down project costs.
Aramco said this month it and ConocoPhillips, its partner in a plan to build a new refinery at Yanbu Industrial City, were halting the bidding process for construction contracts, citing uncertainties in the financial and contract markets.
The Manifa contract award was announced by Saipem in July alongside deals in Nigeria for a total of about 1.6 billion euros ($2 billion).
A RE-TENDER?
Industry website upstreamonline.com said Aramco would re-tender the project. The company had invited Saipem to bid again, along with Bechtel Group, France's Technip SA and Foster Wheeler Ltd, the site said.
Aramco officals were not immediately available for comment on this matter.
A senior executives at U.S. oilfield services company Halliburton Co, which also has a contract on Manifa, said on Wednesday Aramco had not told it that the project was to be cut.
However, U.S. analysts who attended Halliburton's investor meeting this week said the company indicated the project would now be drilled over a longer period of time. By 1822 GMT in New York, its shares were up 5.57 percent to $14.21.
Shares in Japanese engineering and construction company JGC Corp, a Manifa supplier, closed down 1.36 percent.
Saipem is 43 percent owned by Italian oil company Eni SpA . It had a record order backlog of 19.04 billion euros at the end of September.
(Reporting by Nigel Tutt and Claudia Cristoferi and Danilo Masoni in Milan, Atul Prakash and Tom Bergin in London and Simon Webb in Dubai; Writing by Ian Simpson; Editing by David Holmes and Andrew Macdonald) ($1=.7987 Euro) (ian.simpson@reuters.com; +39 02 6612 9666; Reuters Messaging: ian.simpson@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.